Mary's Market Report: Summer Edition

We're seeing the top end softening while the lower end, co-ops and condos remain very strong. I attribute this largely to the favorable taxes in condos, which offer a 1% tax rate--significantly lower than single family homes at 2.5%. I do believe this gap needs to be adjusted, because single family homes are carrying too much of the tax burden. If you've got a two-bedroom house and a two-bedroom condo, the services offered to each are the same. Why does the condo get half-price taxes? I don’t see the true wisdom in that. 

For buyers with cash, a savvy approach would be to pay less on the downpayment and use that extra cash to pay the real estate commission. That way it will not become part of the sale price. The minute it becomes part of a mortgage, it becomes part of the assessed value-- and large houses mean larger tax bills. If an assessment is based on a $50K lower sale price, it would save a buyer $1250 a year in real estate taxed (2.5% RE tax). Additionally, buyers should never include the purchase of furniture or add-ons in the sale price for this very same reason. The bottom line: Make sure your real property is the only included in the your real property value.

We are seeing a lot of inventory from empty nesters, but there continues to be a disjunction between the condition of homes and the expectations on the buyer end. Today's buyer ideal is a move-in ready home in their personal style. Condition has become much larger factor. These days, it's about location AND look. While updating can be a wise financial decision, sellers have lived in their home a long time and might not want to go in that direction for a variety of reasons. 

If this disjunction continues, corporate buyers will come in and buy up the non-renovated homes. These sales are usually cash and offer a quick close...for a wholesaleprice. These homes will then be redone at a premium price. This creates a divide between "fixer uppers" (I used quotes as this can be a relative term!) and renovated homes, which will ultimately drive up prices up on renovated homes. 

I think buyers should start to think about embracing the fixer upper. It could be a financially smart decision and result in a home they truly love.